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CHAPTER 7:PRODUCT STRATEGY AND NEW-PRODUCT DEVELOPMENT
Part 3: Develop the Value Offering—The Product Experience
McGraw-Hill Education
1
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Slide2LEARNING OBJECTIVESUnderstand the essential role of the product experience in marketing
Define the characteristics of a product Recognize how product strategies evolve from one product to many productsUnderstand the life of a product and how product strategies change over time
Recognize the importance of new-product development to long-term successUnderstand the new product development processIdentify how new products become diffused in a market
2
Slide3Product Characteristics A product
is anything that delivers value to satisfy a need or want and includes physical merchandise, services, events, people, places, organizations, information, or ideas.
3
Slide4Product CharacteristicsDefining the ProductEssential Benefit is the fundamental need met by the product (getting from point A to point B on an Southwest Airlines)
Core Product is the physical, tangible elements. (One kind of aircraft, low fares, good website)Enhanced Product includes additional features, designs, and innovation that exceed expectations. (Frequent flyer program, fun and entertaining flight attendants)
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Slide5Four Products and Their Essential Benefits
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Slide6Defining the Product at Southwest Airlines
EXHIBIT 7.2
Enhanced Product
Experiences exceed minimum expectations
Frequent flyer programs
Reserved seating
Core Product
On time
Safe
Experience matches expectations
Essential Benefit
Moving from Point
A to Point B
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Slide7Product ClassificationsTangibility – physical aspects of the product experience
Durability – product usage
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Slide8Product ClassificationsConsumer Goods
8
Slide9Product ClassificationsBusiness Goods
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Slide10Product Discrimination: Create a Point of Differentiation
10-
10
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Slide11Product Plan: Moving from One Product to Many ProductsProduct Line: A group of products linked through usage, customer profile, price points, and distribution channels or needs satisfaction
Product Mix: all the products offered by a company
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Slide12Product Decisions Affect other Marketing Mix ElementsPricingIndividual product pricing within the product line
“good, better, best” product line strategyTechnology companies face special challenges as newer models have better features and lower pricesMarketing Communications
Focus on a single product or the brand?Allocation of budget: Most popular products? Entire line? New products?
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Slide13BUILDING THE PRODUCT EXPERIENCE
Product Life CycleProduct Life Cycle Sales Revenue and Profitability
Product Life Cycle TimelineProduct Life Cycle Caveats
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Slide14The Product Life Cycle
EXHIBIT 7.12
Reprinted from Roger
Kerin
, Steven Hartley and William
Rudelius
, Marketing 9E, 2009.
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Slide15Product Life CycleIntroduction Phase
10-
15
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Slide16Product Life CycleGrowth Phase
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Slide17Product Life CycleMaturity PhasePhase defined by the sales growth of the product category
Relative Market Expansion
Market StabilityMarket Deterioration
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Slide18Product Life CycleMaturity Phase
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Slide19Product Life CycleDecline Phase
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Slide20New Products DefinedCompany PerspectiveNew-to-the-World Disruptive Innovation are so innovative they create a fundamental change in the marketplace. Ex. Cell phones, tablets
Sustaining Innovations are newer, better faster versions of existing products or additions to existing product lines. Ex. Diet Coke, Coke ZeroReposition Existing Products
Add new market segments Ex. Cell phones from business usage to adults to teensCost ReductionIntroduce lower cost products with fewer features or scaled back warranty or service
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Slide21New Products DefinedCustomer’s PerspectiveThe customer’s perspective is much more narrow and self directed.
The customer is most interested in an answer to the fundamental question—is this new product new to me?First purchase of a cell phone , house or auto can be a intimidating experience
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Slide22Why do Products Fail?22
Slide23New Product Development ProcessThe three major activities in new product development are:
Identify Product Opportunities
Define the Product OpportunityDevelop the Product Opportunity
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Slide24Identify Product Opportunities24
Generate New Ideas
Slide25Screen and Evaluate IdeasGo-to-Market MistakeFirm fails to keep a bad product idea from moving into product developmentStop-to-Market Mistake
A good idea is eliminated prematurely
25Identify Product Opportunities
Slide26Identify Product OpportunitiesScreen and Evaluate Ideas
Prioritize ideas that pass initial screening and evaluationTime to market (how long will it take to develop and get the product to market).ROI (what is the expected return for the dollars invested in the project).
New product fit with overall company product portfolio.26
Slide27Define the Product OpportunityDefine the Product Opportunity
Define and test the product ideaCreate a marketing strategyAnalyze the product’s business case
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Slide28Define the Product OpportunityDefine and Test the Product ConceptProduct Definition Objectives
Define the value propositionIdentify the target market and purchase frequencyDelineate the product characteristics Look, feel, physical characteristics, features
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Slide29Define the Product OpportunityCreate the Marketing Strategy
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Budget
Promotion
Place
Price
Product
Target
Market
Slide30Define the Product OpportunityDefine the Product OpportunityConduct Business Case Analysis
Total DemandNew purchasesRepeat purchasesReplacement purchases
Profitability AnalysisLong and short term analysis30
Slide31Define the Product OpportunityDefine the Product OpportunityConduct Business Case Analysis
Total DemandNew purchasesRepeat purchasesReplacement purchases
Profitability Analysis31
Slide32Develop the Product OpportunityDevelop the Product OpportunityDevelop The Product
Product Testing: alpha and betaTest the MarketConsumer Product Market Tests Business Product Market Tests
Product Launch32
Slide33CONSUMER ADOPTION AND DIFFUSION PROCESSConsumer Product Adoption ProcessInnovation diffusion process
is how long it takes a product to move from first purchase to last purchase (the last set of users to adopt the product).An individual moves through five stages before adopting a product.
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Slide34The Diffusion of Innovations34
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